Housing Rents 2012/13 Housing Briefing - 19 January 2012

Rent Increase 2012/13: Contents Background to Rent Restructuring Historic links with Housing Subsidy Rents under HRA Self-Financing HRA Asset Management (Investment) Plan Restructured Rent increase 2012/13 Other rent increase options (examples)

Rent Restructuring Government policy with effect from 2002/03 Continuing under coalition government Based on the Retail Price Index (“RPI”) and moving council rents towards higher housing association rents (“convergence”) Convergence (actual on “formula”) by 2016/17 Uses a “formula rent” based on property and local affordability factors Assumed ½% increase annually Caps & limits on rents & annual increases

Historic Links with Housing Subsidy The government decided how much it thought councils should have spent on housing each year The government paid “allowances” to councils to cover management, maintenance, major repairs and charges for capital The government takes away “guideline rents” from councils This was known as “housing subsidy”; some councils gained (allowances greater than guideline rent) but most including Norwich, were losers (£8m in this financial year) “Housing subsidy” abolished under HRA Self- Financing!

Rents under Self-Financing Income from rents retained in Norwich No allowances for management, maintenance or major repairs No subsidy payments to government Proportion of national housing debt (£151m) to be allocated to Norwich from April 2012 Norwich will need to borrow to fund the additional debt

Rents under Self-Financing Subsidy payments replaced by interest & repayment of borrowing – councils will be better off in long term. Additional borrowing possible up to “debt cap” (£239m) to finance a higher level of investment than minimum Decent Homes (formerly unsustainable) Business Plan shows affordability of interest & repayments – plus impact of investments.

HRA Asset Management Plan Recently consulted on - Norwich Standard + Renewables preferred by tenants.

Restructured Rent Increase Based on September RPI of 5.6% Plus ½% annual increase Plus convergence by 2016/17 Equates to 8.37% (£5.62) increase on average

Other Rent Increase Options The council has looked at the effect of a lower increase than government policy requires. Modelled options are based on lower rates of RPI: RPI (5.6%) = 8.37% average increase RPI-1.5% (4.1%) = 6.85% average increase RPI-3% (2.6%) = 5.33% average increase Not following government policy means less rent income. A lower rent income means a lower base for future rent increases, so the effect is magnified over time.

Other Rent Increase Options

Impact of Ongoing Increases Lower increases = longer to repay debt & longer to free up resources for investment in council housing

Impact of Reduced Increases Reduced increase in 2012/13 could be mitigated by continued convergence on Formula Rent in future years Losses of income during convergence & future effect on average rents shown below (though distortion of effect of caps & limits)

The council’s position The council is considering whether it is more reasonable: to increase rents by 8.37% in order to deliver the improved investment in homes and the planned debt repayment schedule, or; to increase rents by a lower amount at the expense of a slower investment programme and/or delayed repayment of debt. It is on this choice that tenants’ views are being invited for the council to take into consideration when making its decision.

Rent Increase Options 2012/13 Responses to any questions on Rent Increase Options 2012/13